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Cash budget for Joes Bar and Grill

Prepare a cash budget for Joes Bar and Grill based on the following information:

Sales are projected to be 100 in Jan, 150 in Feb, 300 in Mar and 100 in Apr.

Collections are 50% in the month of sale and 50% one month after the sale.

Collections one month after the sale are reduced by the credit card fee of 2%.

COGS is 30% of sales.

Joe has terms of "2/10 net 30" and pays in 30 days for all purchases.

Fixed costs include a fee for protection from Guido and Vito Arm and Leg Preservation services of 10 per month, Taxes of 10 per year to be paid in January, Rent of 2 per month and Utilities of 1 per month.

Minimum cash balance is 20.

Joe has a credit card he uses as his line of credit. It has a maximum limit of 20.

Is Joes line of credit adequate to run his business through the end of April?

Prove your answer by preparation of a cash budget, showing all work.

Solution Summary

The solution prepares cash budget for Joes Bar and Grill and finds out whether Joes line of credit is adequate to run his business through the end of April.

$2.19